<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
AMENDMENT NO. 1
FORM 8-K/A
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
DATE OF REPORT: April 24, 1997 (February 11, 1997)
Commission file number 1-11803
AMERICAN PAD & PAPER COMPANY
(Exact name of registrant as specified in its charter)
Delaware 04-3164298
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
17304 Preston Road, Suite 700, Dallas, TX 75252-5613
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 733-6200
Commission file number 333-3006
AMERICAN PAD & PAPER COMPANY OF DELAWARE, INC.
(Exact name of registrant as specified in its charter)
Delaware 25-1512956
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
17304 Preston Road, Suite 700, Dallas, TX 75252-5613
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 733-6200
================================================================================
<PAGE>
The Company's Current Report on Form 8-K, originally filed with the Securities
and Exchange Commission of February 11, 1997, hereby is amended by adding the
following information:
Item 7. Financial Statements of Business Acquired
On February 11, 1997, American Pad & Paper Company, through its wholly owned
subsidiary, American Pad & Paper Company of Delaware, Inc. (collectively
referred to as the "Company"), completed its acquisition of Shade/Allied, Inc.
("Shade/Allied") for $49.5 million in cash. The Company financed the
acquisition with debt borrowed under its revolver credit agreement with its
banking group.
Based in Green Bay, Wisconsin, Shade/Allied manufactures paper based office
products in four states and realized net sales of approximately $92 million in
1996. Shade/Allied manufactures and sells products such as continuous forms,
ink jet papers, printed forms, technical papers and fine papers.
The following index lists the pro forma and historical financial data included
herein:
<TABLE>
<CAPTION>
Description Page
----------- ----
<S> <C>
AMERICAN PAD & PAPER COMPANY
Headnote to pro forma financial data 3
Pro forma condensed consolidated statement of income 4
Notes to pro forma condensed consolidated statement of income 5
Pro forma condensed consolidated balance sheet 7
Notes to pro forma condensed consolidated balance sheet 8
SHADE/ALLIED, INC.
Report of independent accountants 9
Balance sheets as of March 31, 1996 and 1995 10
Statements of income (loss) for the years ended March 31, 1996, 1995 and 1994 11
Statements of stockholders' equity for the years ended March 31, 1996, 1995 and 1994 12
Statements of cash flows for the years ended March 31, 1996, 1995 and 1994 13
Notes to financial statements 14
Balance sheet as of December 31, 1996 26
Statements of income for the nine months ended December 31, 1996 and 1995 27
Statements of cash flows for the nine months ended December 31, 1996 and 1995 28
Notes to interim financial statements 29
</TABLE>
2
<PAGE>
PRO FORMA FINANCIAL DATA
(UNAUDITED)
The pro forma condensed consolidated statement of income for the year ended
December 31, 1996 gives effect to the following transactions as if they had
occurred on January 1, 1996:
(a) On February 11, 1997, the Company acquired all of the outstanding common and
preferred stock of Shade/Allied, Inc. ("Shade/Allied") for approximately
$49.5 million in cash financed by borrowings under the Company's bank credit
agreement.
(b) On June 28, 1996, the Company acquired all of the outstanding common stock
of Niagara Envelope Company, Inc. ("Niagara") for approximately $48.2
million, including direct costs of the acquisition.
(c) On June 27, 1996, the Company sold the Regency Division of Williamhouse for
net proceeds of approximately $47.9 million. The net proceeds from this
sale were used primarily to finance the acquisition of Niagara.
(d) On July 2, 1996, the Company sold 12,500,000 shares of its common stock in
an initial public offering at an initial price of $15. The proceeds of this
initial public offering, net of underwriting commissions and discounts, were
used (i) to repay $70.0 million of 13% senior subordinated debentures, (ii)
to repay $7.7 million in redemption premiums on such notes, (iii) to pay
$95.8 million outstanding under the Company's old bank credit agreement and
(iv) to pay fees and expenses associated with the initial public offering.
(e) Concurrent with the Company's initial public offering of common stock, the
Company refinanced and retired all remaining indebtedness under the old bank
credit agreement with the proceeds from the loans under the new bank credit
agreement.
The pro forma financial data are based on the historical financial statements of
the Company, Shade/Allied and Niagara and the assumptions and adjustments
described in the accompanying notes. The pro forma consolidated statement of
income does not (a) purport to present what the Company's results of operations
actually would have been if the foregoing transactions occurred as of the date
indicated or what such results will be for any future periods or (b) give effect
to certain extraordinary charges resulting from the write-off of deferred
financing fees and direct expenses resulting from the refinancing of the bank
credit agreement, a portion of the 13% senior subordinated notes and existing
Niagara debt.
The pro forma condensed consolidated balance sheet as of December 31, 1996
gives effect to the acquisition of Shade/Allied as if such transaction had
occurred on December 31, 1996. The Company's historical condensed consolidated
balance sheet as of December 31, 1996 reflects transactions (b), (c), (d) and
(e) as described above.
The pro forma condensed consolidated balance sheet and statement of income
reflect the preliminary allocation of the Shade/Allied purchase price to the
Company's tangible and intangible assets and liabilities. The final allocation
of purchase price, and the resulting amortization expense, may differ somewhat
from the preliminary estimates.
The pro forma financial data are based upon assumptions that the Company
believes are reasonable and should be read in conjunction with the consolidated
financial statements of the Company included in its 1996 Annual Report on Form
10-K, which are not presented separately herein, and the financial statements of
Shade/Allied and the accompanying notes thereto which are presented separately
herein. Additional information related to these transactions and the business
of the Company, Niagara and Shade/Allied is included in the 1996 Form 10-K.
The pro forma information included herein is unaudited.
3
<PAGE>
AMERICAN PAD & PAPER COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THE COMPANY HISTORICAL HISTORICAL
FOR THE YEAR NIAGARA FOR SHADE/ALLIED
ENDED THE SIX FOR THE YEAR TRANSACTION
DECEMBER 31, MONTHS ENDED ENDED DECEMBER AND OTHER COMPANY PRO
1996 JUNE 28, 1996 31, 1996 ADJUSTMENTS FORMA
<S> <C> <C> <C> <C> <C>
Net sales $583,859 $54,531 $92,412 - $730,802
Cost of sales 458,449 44,622 79,680 815 (1) 582,937
(554) (2)
(75) (7)
-------- ------- ------- -------- --------
Gross profit 125,410 9,909 12,732 (186) 147,865
-------- ------- ------- -------- --------
Operating expenses
Selling and marketing 16,964 1,979 3,802 (1,706) (2) 21,039
General and administrative 30,685 3,324 4,609 (2,442) (2) 36,365
189 (3)
Management fees and services 3,880 - - - 3,880
-------- ------- ------- -------- --------
51,529 5,303 8,411 (3,959) 61,284
-------- ------- ------- -------- --------
Income from operations 73,881 4,606 4,321 3,773 86,581
Interest expense (42,968) (89) (2,177) (1,167) (4) (46,401)
Other income (expense) 1,153 (5) (394) 394 (2) 1,148
-------- ------- ------- -------- --------
Income before income taxes 32,066 4,512 1,750 3,000 41,328
Provision for income taxes 13,852 1,692 1,210 1,276 (5) 18,030
-------- ------- ------- -------- --------
Net income before
extraordinary charges $ 18,214 $ 2,820 $ 540 $ 1,724 $ 23,298
======== ======= ======= ======== ========
Pro forma net earnings per common and common equivalent share before extraordinary charges (6) $0.79
========
Pro forma weighted average number of common and common equivalent shares outstanding (6) 29,607
========
</TABLE>
4
<PAGE>
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PERCENTAGE AMOUNTS)
(UNAUDITED)
The pro forma condensed consolidated statement of income gives effect to the
following pro forma adjustments:
(1) Represents additional depreciation expense resulting from the write-up of
property, plant and equipment to fair market values for the Niagara and
Shade/Allied acquisitions as summarized below:
<TABLE>
<CAPTION>
Estimated Adjustment
Useful Life Fair Value to Annual
in Years Adjustment Depreciation
<S> <C> <C> <C>
Niagara:
Land - - -
Buildings 40 (1,328) (17)
Machinery and equipment 12 6,684 278
Furniture and fixtures 5 - -
Other 3 - -
Shade/Allied:
Land - - -
Buildings 40 873 22
Machinery and equipment 12 6,380 532
Furniture and fixtures 5 - -
Other 3 - -
</TABLE>
The adjustment for the year ended December 31, 1996 represents the
additional depreciation expense for Niagara for the six months prior to the
acquisition. The adjustment for the year ended December 31, 1996 represents
the additional depreciation expense for Shade/Allied for the year.
(2) Reflects the estimated recurring cost savings relating to selling, general
and administrative ("SG&A") and cost of sales activities from management's
consolidation plans as described below:
(a) Elimination of Shade/Allied's Green Bay and Niagara's Buffalo
headquarters facilities, including the facilities' occupancy and
maintenance costs, as well as workforce reductions, primarily executive,
personnel, accounting and administrative functions and associated direct
overhead costs (net of increase in the Company's Dallas, Texas
headquarters staff);
(b) Consolidation of sales and marketing organizations, along with sales
distribution and promotional activity program charges; and
(c) Elimination of lease expense for plants and equipment leased by Niagara
from its former shareholders or from affiliated companies owned by its
former shareholders.
The Company does not expect to experience a decline in sales volume as a
result of the consolidation of its sales and marketing organizations.
(3) Reflects the goodwill amortization expense resulting from the Niagara and
Shade/Allied acquisitions for the six months ended June 28, 1996 and the
year ended December 31, 1996, respectively. The Niagara acquisition
resulted in additional goodwill of $19,780 which is being amortized on a
straight
5
<PAGE>
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE AND PERCENTAGE AMOUNTS)
(UNAUDITED)
line basis over 40 years. The Shade/Allied acquisition resulted in
additional goodwill of $49,401 which is being amortized on a straight line
basis over 40 years. The adjustment also reflects a reduction of $1,293 to
reduce historical goodwill amortization of Shade/Allied prior to the
acquisitions.
(4) The adjustments reflect the elimination of interest expense for Niagara and
Shade/Allied debt which was repaid at the dates of the acquisitions and the
additional interest expense related to the Company's borrowing under its
bank credit agreement to finance the Shade/Allied acquisition. Pro forma
interest expense reflects terms of the Company's bank credit agreement which
was refinanced concurrent with the Company's initial public offering of
common stock.
(5) Adjustment to provision for income taxes such that the pro forma provision
for income taxes results in an effective income tax rate for the
year ended December 31, 1996 of 43.6%. A tax provision in the pro forma
adjustments, except goodwill amortization, has been recorded at the
statutory federal and state tax rate of 40.%.
(6) Pro forma net earnings per share before extraordinary items has been
computed using the pro forma weighted average number of common shares and
common share equivalents outstanding during the year adjusted for the
Company's initial public offering of common stock on July 2, 1996. Common
share equivalents result from outstanding options to purchase common stock
and have been determined using the treasury stock method.
6
<PAGE>
AMERICAN PAD & PAPER COMPANY
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------- TRANSACTION COMPANY
THE COMPANY SHADE/ALLIED ADJUSTMENTS PRO FORMA
------------------------------------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
- ------
Current assets:
Cash $ 2,290 $ 3 $ - $ 2,293
Accounts receivable 57,054 6,091 - 63,145
Inventories 105,667 7,078 201 (2) 112,946
Prepaid expenses and
other current assets 4,739 143 - 4,882
Deferred income taxes 10,754 - - 10,754
--------- ------- ------- ---------
Total current assets 180,504 13,315 201 194,020
Property and equipment 133,090 3,976 7,253 (3) 144,319
Intangible assets 192,367 33,836 10,565 (1) 236,768
Other 3,456 720 - 4,176
--------- ------- ------- ---------
Total assets $ 509,417 $51,847 $18,019 $ 579,283
========= ======= ======= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Current portion of long-term debt $ 2,171 $ 3,930 $(3,930) (1) $ 2,171
Accounts payable 44,932 6,817 - 51,749
Accrued expenses 55,041 4,253 3,000 (4) 62,294
Income taxes payable 503 1,952 - 2,455
--------- ------- ------- ---------
Total current liabilities 102,647 16,952 (930) 118,669
Long-term debt 269,812 25,136 25,385 (1) 320,333
Deferred income taxes 30,981 541 1,781 (1) 33,303
Other 1,378 1,001 - 2,379
--------- ------- ------- ---------
Total liabilities 404,818 43,630 26,236 474,684
--------- ------- ------- ---------
Commitments and contingencies
Stockholders' equity:
Shade/Allied stockholders' equity - 8,217 (8,217) (4) -
Preferred stock - - - -
Common stock 274 - - 274
Additional paid-in capital 300,721 - - 300,721
Accumulated deficit (196,396) - - (196,396)
--------- ------- ------- ---------
Total stockholders' equity 104,599 8,217 (8,217) 104,599
--------- ------- ------- ---------
Total liabilities and
stockholders' equity $ 509,417 $51,847 $18,019 $ 579,283
========= ======= ======= =========
</TABLE>
7
<PAGE>
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE AND PERCENTAGE AMOUNTS)
(UNAUDITED)
The pro forma condensed consolidated balance sheet gives effect to the following
pro forma adjustments:
(1) Reflects management's preliminary allocation of purchase price for the
Shade/Allied acquisition in accordance with the purchase method of
accounting as follows:
<TABLE>
<S> <C>
Purchase price:
Cash portion of purchase price $49,476
Estimated fees and expenses 1,045
-------
Total $50,521
=======
Allocated as follows:
Existing book value of Shade/Allied $ 8,217
Increase in inventory to estimated fair market value (2) 201
Estimated increase in property and equipment to fair market value (3) 7,253
Reduction in deferred financing costs (528)
Transaction related liabilities including severance (3,000)
Increase in net deferred tax liabilities (1,781)
Increase in goodwill 11,093
Repayment of Shade/Allied debt at the date of acquisition 29,066
-------
Total $50,521
=======
</TABLE>
(2) Represents the estimated write-up of work-in-progress and finished goods
inventories in connection with the purchase price allocation. Since the
Company calculates inventory under the LIFO method, this write-up will not
result in a charge to cost of sales in any period following the Shade/Allied
acquisition unless the base year inventory levels are reduced. In any
event, any resulting one-time charge would not be reflected in the
accompanying pro forma consolidated statements of income due to its unusual,
non-recurring nature.
(3) Represents the estimated write-up in value of property and equipment to fair
market value in connection with the purchase price allocation for the
Shade/allied acquisition.
(4) Represents elimination of Shade/Allied's historical stockholders' equity
resulting from the application of purchase accounting in connection with the
Shade/Allied acquisition.
8
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
Shade/Allied Inc.:
We have audited the accompanying balance sheets of Shade/Allied Inc. (a
Wisconsin corporation) as of March 31, 1996 and 1995, and the related statements
of income (loss), stockholders' equity and cash flows for each of the three
years in the period ended March 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Shade/Allied Inc. as of March
31, 1996 and 1995, and the results of their operations and their cash flows for
the three years in the period ended March 31, 1996, in conformity with generally
accepted accounting principles.
As explained in Note 12 to the financial statements, effective April 1, 1995,
the Company changed its method of accounting for retiree health care benefits.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
May 13, 1996 (except with
respect to the matters discussed
in Note 5 and Note 14, as to which the
dates are June 17, 1996 and
February 11, 1997, respectively).
9
<PAGE>
SHADE/ALLIED INC.
-----------------
BALANCE SHEETS--AS OF MARCH 31, 1996 AND 1995
---------------------------------------------
<TABLE>
<CAPTION>
LIABILITIES AND
ASSETS 1996 1995 STOCKHOLDERS' EQUITY 1996 1995
- ------------------------------- __________________________ ------------------------------------------ ________________________
CURRENT ASSETS: CURRENT LIABILITIES:
<S> <C> <C> <C> <C> <C>
Cash $ 16,247 $ 14,014 Current portion of long-term debt $ 1,890,000 $ 3,578,000
Accounts receivable, net of Accounts payable 8,230,372 12,633,091
allowance for
doubtful accounts of $70,000 7,611,104 13,572,210 Accrued liabilities 4,288,416 5,423,503
for 1996 and 1995
Inventories 9,731,599 9,703,078 Accrued income taxes 4,670,545 990,505
Prepaid expenses 128,797 332,193 Deferred income taxes 1,010,330 383,802
---------------------------
Custom division net assets - 2,910,220
held for sale
Property and equipment held - 2,965,635 Total current liabilities 20,089,663 23,008,901
for sale
--------------------------- ---------------------------
Total current assets 17,487,747 29,497,350 DEFERRED INCOME TAXES 541,191 4,194,948
---------------------------
PLANT AND EQUIPMENT: OTHER LIABILITIES 1,001,193 790,394
Land and buildings 2,903,637 2,835,649
Machinery and equipment 11,404,500 11,048,048 LONG-TERM DEBT 28,231,754 39,542,511
---------------------------
14,308,137 13,883,697
REDEEMABLE PREFERRED STOCK 10,176,995 10,119,762
Less- Accumulated depreciation (9,428,175) (8,085,993)
---------------------------
STOCKHOLDERS' EQUITY:
Plant and equipment, net 4,879,962 5,797,704
Common stock 30,166 30,166
OTHER ASSETS: Additional paid in capital 1,755,999 1,755,999
Other assets 700,516 728,147 Pension liability adjustment (184,722) (89,563)
Debt issuance costs 751,817 1,045,417 Retained deficit (3,729,871) (7,011,221)
Goodwill 34,054,054 35,235,007 Treasury stock (38,272) (38,272)
--------------------------- ---------------------------
(2,166,700) (5,352,891)
Total assets $57,874,096 $72,303,625 Total liabilities and stockholders' equity $57,874,096 $72,303,625
=========================== ===========================
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
10
<PAGE>
SHADE/ALLIED INC.
-----------------
STATEMENTS OF INCOME (LOSS)
---------------------------
FOR THE YEARS ENDED MARCH 31, 1996, 1995, and 1994
--------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
----------------------------------------------
<S> <C> <C> <C>
NET SALES $113,825,426 $ 149,595,224 $ 123,695,619
COST OF GOODS SOLD (93,607,177) (130,259,213) (112,526,198)
----------------------------------------------
Gross profit 20,218,249 19,336,011 11,169,421
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES (8,844,844) (11,060,253) (11,538,901)
AMORTIZATION OF GOODWILL (996,205) (994,800) (882,758)
RESTRUCTURING EXPENSE (734,285) (5,545,823) -
----------------------------------------------
Income (loss) from operations 9,642,915 1,735,135 (1,252,238)
INTEREST EXPENSE (3,059,894) (4,635,615) (3,588,220)
----------------------------------------------
Income (loss) before income taxes
and cumulative effect of 6,583,021 (2,900,480) (4,840,458)
accounting change
INCOME TAX (PROVISION) BENEFIT (3,093,137) 565,360 1,335,982
----------------------------------------------
Net income (loss) before
cumulative effect of accounting 3,489,884 (2,335,120) (3,504,476)
change
Cumulative effect on prior years
of change in accounting for
retiree health care benefits (net
of income taxes of $110,377) (151,301) - -
----------------------------------------------
Net income (loss) $ 3,338,583 $ (2,335,120) $ (3,504,476)
==============================================
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
11
<PAGE>
SHADE/ALLIED INC.
-----------------
STATEMENTS OF STOCKHOLDERS' EQUITY
----------------------------------
FOR THE YEARS ENDED MARCH 31, 1996, 1995 AND 1994
-------------------------------------------------
<TABLE>
<CAPTION>
Common Stock (1)
-----------------------------------------
Pension
Additional Liability Retained Treasury
Par Value Paid-In Capital Adjustment Deficit Stock Total
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, March 31, 1993 $ 9,000 $ 15,717,461 $ $(14,853,994) $ $ 872,467
- -
Net loss - - - (3,504,476) - (3,504,476)
Write-off of warrant accretion - (13,961,462) - 13,961,462 - -
Exercise of warrants 10,608 - - - - 10,608
Issuance of common stock 10,558 - - - - 10,558
Preferred dividends deemed paid - - - (62,122) - (62,122)
Accretion to redemption/put value - - - (121,583) - (121,583)
Pension liability adjustment - - (172,935) - - (172,935)
Purchase treasury shares - - - - (38,272) (38,272)
Accrue preferred dividends - - - (38,155) - (38,155)
---------------------------------------------------------------------------------
BALANCE, March 31, 1994 30,166 1,755,999 (172,935) (4,542,558) (38,272) (3,043,910)
Net loss - - - (2,335,120) - (2,335,120)
Pension liability adjustment - - 83,372 - - 83,372
Accrue preferred dividends - - - (57,233) - (57,233)
---------------------------------------------------------------------------------
BALANCE, March 31, 1995 30,166 1,755,999 (89,563) (7,011,221) (38,272) (5,352,891)
Net income - - - 3,338,583 - 3,338,583
Pension liability adjustment - - (95,159) - - (95,159)
Accrue preferred dividends - - - (57,233) - (57,233)
---------------------------------------------------------------------------------
BALANCE, March 31, 1996 $30,166 $ 1,755,999 $(184,722) $ (3,729,871) $(38,272) $(2,166,700)
=================================================================================
</TABLE>
(1) As of March 31, 1996 and 1995:
------------------------------
Common, voting, $.01 par value, 9,975,000 shares
authorized; 3,017 shares issued, 2,497 shares outstanding.
As of March 31, 1994:
-----------------------
Class A common, voting, $.01 par value, 1,600,000 shares
authorized; 1,470,575 shares issued and outstanding.
Class B common voting $.01 par value, 4,000,000 shares
authorized, 1,055,754 shares issued, 1,045,051 shares
outstanding.
Class C common, voting, $.01 par value, 500,000 shares
authorized; 490,192 shares issued and outstanding.
The accompanying notes to financial statements are an integral part of these
statements.
12
<PAGE>
SHADE/ALLIED INC.
-----------------
STATEMENTS OF CASH FLOWS
------------------------
FOR THE YEARS ENDED MARCH 31, 1996, 1995, and 1994
--------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------------------
<S> <C> <C> <C>
Net income (loss) $ 3,338,583 $(2,335,120) $(3,504,476)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities-
Cumulative effect of accounting change 151,301 - -
Depreciation and amortization 2,896,264 4,621,964 4,083,737
Deferred income tax benefit (2,869,660) (1,401,502) (111,143)
Noncash restructuring expense 734,285 5,545,823 -
Cash paid for restructuring (1,120,449) (1,883,304) -
Non-cash interest on subordinated debt - - 665,750
Changes in components of working
capital-
Accounts receivable 5,961,106 2,351,645 (2,081,527)
Inventories (28,521) 870,236 1,582,614
Prepaid expenses and other assets 231,027 9,572 170,298
Income tax refund - 1,595,545 (1,272,679)
Accounts payable (4,402,719) (3,510,631) 3,722,395
Accrued liabilities (156,369) (1,344,434) (1,403,624)
Accrued income taxes 3,680,040 990,505 -
------------------------------------------
Net cash provided by operating 8,414,888 5,510,299 1,851,345
activities
Capital expenditures (563,324) (257,466) (115,500)
Merger transaction expenses - - (1,647,387)
Proceeds from sale of assets 5,149,426 429,510 -
------------------------------------------
Net cash provided by (used in) 4,586,102 172,044 (1,762,887)
investing activities
Net repayment under revolver (6,688,882) (5,714,224) 582,944
Payments on long-term debt (6,309,875) (2,961,147) (644,066)
Proceeds from issuance of long-term debt - 3,000,000 -
Warrants exercised - - 10,608
Treasury stock purchased - - (38,272)
------------------------------------------
Net cash (used in) financing (12,998,757) (5,675,371) (88,786)
activities
Net change in cash 2,233 6,972 (328)
CASH, beginning of year 14,014 7,042 1,795
CASH, purchased in the acquisition - - 5,575
------------------------------------------
CASH, end of year $ 16,247 $ 14,014 $ 7,042
==========================================
Cash paid for interest $ 2,674,526 $ 3,728,235 $ 2,270,943
Cash paid for taxes 2,117,972 58,975 47,840
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
13
<PAGE>
SHADE/ALLIED INC.
-----------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
MARCH 31, 1996, 1995, AND 1994
------------------------------
(1) Description of Business-
------------------------
Shade/Allied Inc. (the "Company") manufactures computer forms and other paper
related products for sale to distributors and direct market customers.
(2) Summary of Significant Accounting Policies-
-------------------------------------------
(a) Inventories-
------------
Finished goods and most raw materials are stated at the last-in, first out
("LIFO") cost, or market. Certain supplies are stated at the first-in,
first-out ("FIFO") cost. The major classes of inventory are summarized as
follows:
<TABLE>
<CAPTION>
1996 1995
------------------------
<S> <C> <C>
Raw Materials $4,165,357 $5,160,843
Work-in-process - 122,651
Finished Goods 5,566,242 5,228,072
LIFO reserve - (808,488)
------------------------
$9,731,599 $9,703,078
========================
</TABLE>
At March 31, 1996, LIFO cost exceeded current cost by approximately
$301,000. Thus, the Company recorded a market valuation reserve to reduce
the LIFO cost to net realizable value.
(b) Plant and equipment-
--------------------
Plant and equipment acquired is carried at the lower of cost or net
realizable value. Depreciation of plant and equipment is computed on the
straight-line method for financial reporting purposes based on the
following estimated useful lives:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Buildings and improvements 30-40
Machinery and equipment 3-12
Office furniture and equipment 5-8
</TABLE>
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS No.
121"). The Company's adoption
14
<PAGE>
of SFAS No. 121 effective April 1, 1995 had no effect on the fiscal year
1996 financial statements.
(c) Goodwill-
---------
The goodwill is being amortized over 40 years. The Company periodically
evaluates the carrying value of goodwill for possible impairment using the
methodology prescribed by SFAS No. 121. No impairment of goodwill has been
detected.
(d) Use of estimates-
-----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reported period. Actual results could differ from those
estimates.
(3) Merger-
-------
On July 21, 1993, Shade Information Systems Inc. ("Shade") merged with Allied
Paper Incorporated ("Allied"). The surviving corporation was Shade
Information Systems Inc. whose name was changed to Shade/Allied Inc.
The merger has been accounted for under the purchase method of accounting. It
was financed with $27,778,569 of debt, $1,647,387 of cash for transaction
expenses and $5,977,812 of preferred and common stock. The purchase price was
allocated as follows:
<TABLE>
<CAPTION>
<S> <C>
Current assets $ 17,477,358
Property, plant and equipment 18,145,689
Transaction costs 1,647,387
Restricted cash 751,000
Current liabilities (11,193,756)
Net deferred tax liability (6,036,829)
Pension liability (677,341)
Goodwill 15,290,260
--------------
$ 35,403,768
==============
</TABLE>
15
<PAGE>
(4) Restructuring-
--------------
During fiscal year 1995, the Company identified restructuring measures that
resulted in a $5,545,823 pretax charge to operating results consisting of the
following:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
3/31/95
Total Expended in Remaining
Charge FY 1995 Liability
-------------------------------------
Employee severance costs $1,378,069 $ 556,024 $ 822,045
Writedown of assets held for sale 1,870,388 1,683,228 187,160
Loss on sale of assets 778,086 778,086 -
Lease termination and plant closing 661,352 612,352 49,000
costs
Legal, accounting and other 345,928 300,928 45,000
professional fees
Pension curtailment 107,282 107,282 -
Other 404,718 306,718 98,000
-------------------------------------
Total $5,545,823 $4,344,618 $1,201,205
=====================================
</TABLE>
During fiscal year 1996, the Company identified additional measures that
resulted in a $734,285 pretax charge to operating results consisting of the
following:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
3/31/95 3/31/96
Remaining Additional Expended in Remaining
Liability Charge FY 1996 Liability
------------------------------------------------
Employee severance costs $ 822,045 $ 27,344 $ 728,399 $121,010
Writedown of assets held for sale 187,160 63,738 250,898 -
Loss on sale of assets - 443,153 443,153 -
Lease termination and plant closing
costs 49,000 77,045 126,045 -
Legal, accounting and other
professional fees 45,000 123,005 168,005 -
Other 98,000 - 98,000 -
------------------------------------------------
Total $1,201,205 $734,285 $1,814,500 $121,010
================================================
</TABLE>
The restructuring charges are both attributable to the Company's aggressive
response to the reduction in the availability of its primary raw material--
paper. Specific actions included closure of two plants (Buena Park, CA and
Denison, TX), writedown and sale of excess assets, reduction in the breadth of
product offerings, sale of the Custom division and employment reductions at
all remaining locations. Total employment reduction from these measures was
approximately 365 employees resulting in a current employment level of 260
employees.
16
<PAGE>
The Buena Park facility was being offered for sale as of March 31, 1995, and
therefore, is included in Property and Equipment Held for Sale at that date.
It was sold in February, 1996. The Denison facility was leased and all
continuing lease obligations expired in August, 1995. Certain machinery and
equipment was moved from these facilities to the Company's other facilities
while excess equipment was sold.
As of March 31, 1995, certain Custom division assets were held for sale and
are reflected as such on the accompanying balance sheet. On April 16, 1995,
these Custom division net assets were sold. This resulted in a pretax loss of
approximately $180,000, which was included in the fiscal year 1995
restructuring charge. The Custom division assets and liabilities sold
consisted of:
<TABLE>
<CAPTION>
<S> <C>
Plant and equipment, net $ 4,431,575
Inventory 2,333,645
Industrial development bonds (3,680,000)
Other liabilities assumed by buyer (175,000)
-------------
Net assets sold $ 2,910,220
=============
</TABLE>
Prior to the sale, the Custom division had sales of approximately $24 million
and operating income of $1.7 million annually.
<TABLE>
<CAPTION>
<S> <C>
(5) Accrued Liabilities-
--------------------
</TABLE>
As of March 31, accrued liabilities consisted of the following:
<TABLE>
<CAPTION>
1996 1995
------------------------
<S> <C> <C>
Interest $1,073,288 $ 926,655
Employee benefits 1,670,297 1,387,916
Restructuring 121,010 1,201,205
Other 1,423,821 1,907,727
------------------------
$4,288,416 $5,423,503
========================
</TABLE>
(6) Income Taxes-
-------------
The Company has adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." In accordance with that statement, deferred
tax assets and liabilities are reflected for the temporary difference between
the tax basis and the book value of assets and liabilities.
17
<PAGE>
The (provision) benefit for income taxes for the respective fiscal years
consists of the following:
<TABLE>
<CAPTION>
1996 1995 1994
---------------------------------------
Current:
<S> <C> <C> <C>
Federal $(5,167,554) $ (889,821) $1,228,816
State (795,243) 53,679 (3,977)
---------------------------------------
(5,962,797) (836,142) 1,224,839
Deferred 2,869,660 1,401,502 111,143
---------------------------------------
$(3,093,137) $ 565,360 $1,335,982
=======================================
Temporary differences that give rise
to the net deferred tax asset
(liability) are as follows:
1996 1995
---------------------------
Inventory $(2,215,070) $(2,739,999)
Restructuring 273,237 610,808
Interest 469,931 592,492
Alternative minimum tax - 340,500
Accruals not currently deductible 461,572 812,397
---------------------------
Net current $(1,010,330) $ (383,802)
===========================
Plant and Equipment $ (963,054) $(4,358,563)
Retiree benefits 354,767 317,534
Other 67,096 (153,919)
---------------------------
Net non-current deferred $ (541,191) $(4,194,948)
taxes
===========================
</TABLE>
The effective tax rate differs from the statutory Federal rate principally due
to nondeductible expenses associated with the amortization of goodwill and
state income taxes. The following table reconciles the statutory federal
income tax rate to the effective income tax rate from continuing operations:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% (35.0)% (34.0)%
State income taxes 4.8 1.8 .3
Goodwill amortization 5.3 11.7 6.2
Additional income tax provision - 3.3 -
Other differences, net (.9) (1.3) (.1)
------------------------
44.2% (19.5)% (27.6)%
========================
</TABLE>
18
<PAGE>
<TABLE>
<S> <C>
(7) Long-Term Debt-
---------------
</TABLE>
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1996 1995
--------------------------
<S> <C> <C>
Revolving Credit Agreement (the
"Agreement") under which the Company
may borrow up to $18 million based
on amounts not exceeding a specified
percentage of qualified receivables
and inventory; this agreement
expires July 21, 1998. There is a
1/2% commitment fee on the unused
available credit. The interest rate
associated with this agreement is
based on the prime rate established
by Chemical Bank plus .75%.
Borrowings under this agreement are
secured by accounts receivable and
inventory of the Company. These
borrowings do not include $2,628,515
and $3,812,172, representing book
cash overdrafts at March 31, 1996
and 1995, respectively, which are
included in accounts payable and
will be funded under the Agreement. $ 8,223,231 $14,912,113
Term Loan, with a fixed rate of
interest of 8.83%, payable in
incremental installments, secured by 6,291,200 12,601,075
all assets of the Company, maturing
August, 1998.
Senior Subordinated Note, maturing 10,012,506 10,012,506
November 1, 1998
Junior Subordinated Notes, maturing 2,594,817 2,594,817
November 1, 1998
Series A Senior Subordinated Notes,
with a fixed interest rate of 6% 1,000,000 1,000,000
payable quarterly, maturing November
1, 1998
Series B Senior Subordinated Notes,
with a fixed interest rate of 6% 2,000,000 2,000,000
payable quarterly, maturing November
1, 1998
--------------------------
Total 30,121,754 43,120,511
Less- Current portion 1,890,000 3,578,000
--------------------------
Total long-term debt $28,231,754 $39,542,511
==========================
</TABLE>
Under the revolving credit agreement, maximum month-end borrowings in 1996
were $14.5 million. Average outstanding borrowings in 1996 were $10.9
million. The interest rate was 9.0% at March 31, 1996.
The Term Loan Agreement was amended in June, 1996, effective as of April 1,
1996. The amendment deferred the required principal payments for the months
of April through September, 1996. Accordingly, the remaining monthly
principal installments are due as follows: $300,000 for the months October,
1996 through December, 1996, $330,000 for the months of January, 1997 through
April, 1998, with a final installment of $111,200 due in May, 1998.
19
<PAGE>
In addition to the amendment to the Term Loan Agreement, the Company entered
into an overadvance facility in June 1996. The overadvance facility may not
exceed $1.75 million and is incrementally reduced to zero over the period June
1996 through September 1997.
The interest rates on the Senior Subordinated Note and the Junior Subordinated
Notes are 0% during the period from July 21, 1993 through May 31, 1996; 6%
during the period from June 1, 1996 through October 31, 1998; and 12% from
November 1,1998 and thereafter. Interest is being accrued on a straight-line
basis on these notes for the period from July 21, 1993 through October 31,
1998.
The most restrictive covenants for the various debt agreements, as amended,
are as follows:
o Maintain net worth, as defined, at increasing levels for each fiscal
period.
o Maintain a current ratio, as defined, at increasing levels for each
fiscal period.
o Maintain a ratio of interest coverage, as defined, at a minimum
specified level.
o Attain a minimum level of earnings before interest and taxes, as
defined, for each fiscal period.
The debt agreements, among other items, preclude the payment of any dividends
other than dividends on the preferred stock, and restrict the Company from
incurring additional debt.
Required long-term maturities during each of the four subsequent fiscal years
are as follows:
<TABLE>
<CAPTION>
<S> <C>
1997 $ 1,890,000
1998 3,960,000
1999 24,271,754
-------------
$30,121,754
=============
</TABLE>
In connection with Company borrowings, debt issuance costs are capitalized and
amortized over the terms of the related debt. Amortization of debt issuance
costs totaled $293,600, $305,934, and $329,462 for the years ended March 31,
1996, 1995, and 1994, respectively, and is classified as a component of
interest expense.
(8) Preferred Stock-
----------------
The Company must redeem the 7% preferred shares prior to November 1, 1998, or
earlier upon the issuance of stock or sale of the Company. The redemption
price is $1,000 per share plus cumulative unpaid dividends. The holders of
the preferred stock have limited voting rights.
20
<PAGE>
The dividend rate on preferred stock of the Company is established as follows:
0% during the period from July 21, 1993 through May 31, 1996 and 3% for the
period June 1, 1996 through October 31, 1998.
(9) Equity-
-------
During fiscal year 1995, the stockholders approved a plan which converted each
share of the three classes of common stock to new common shares at an exchange
rate of one share of old common for .001 of new common stock.
During fiscal year 1995, the Company issued new warrants to the holders of the
Series A and Series B Senior Subordinated Notes issued on the same date (see
Note 7). These warrants entitle the holders of these notes to purchase
297,576 shares of new common stock at a price of $.01 share. These warrants
have not been exercised.
During fiscal year 1995, the stockholders approved a stock option plan for key
employees, covering 33,341 shares of common stock. The purchase price is one
dollar per share. Options granted, generally vest and are exercisable in
three equal installments over a three year period. The optionee must be an
employee of the Company in order to exercise the options.
At March 31, 1996, 11,341 shares were available for granting further options
and options for 22,000 shares were outstanding, of which 10,666 options were
exercisable.
Activity relating to the common stock options was:
<TABLE>
<CAPTION>
Number of
Shares
-----------
<S> <C>
Options granted 22,000
Options surrendered -
-----------
Shares under option at March 31, 1995 22,000
Options granted -
Options surrendered -
-----------
Shares under option at March 31, 1996 22,000
===========
</TABLE>
In October 1995, SFAS No. 123, "Accounting for Stock-Based Compensation" was
issued. The Company intends to adopt this standard in 1997 by making the
required footnote disclosures only. Therefore, the adoption of this standard
is not expected to have an effect on the Company's financial position or
results of operations.
21
<PAGE>
(10) Leases-
-------
The Company has long-term lease agreements for the use of manufacturing
facilities and certain manufacturing, communication, and data processing
equipment. These leases have been accounted for as operating leases and
payments are charged to expense currently. The Company also leases office
facilities under a lease which expires in fiscal 1997 having a minimum monthly
rental of $14,000.
The following is a schedule of future minimum lease payments required under
operating leases that have noncancellable lease terms in excess of one year:
<TABLE>
<CAPTION>
<S> <C>
1997 $1,274,454
1998 892,375
1999 704,951
2000 667,062
2001 620,066
2002 and thereafter 270,997
------------
Total minimum lease payments $4,429,905
============
</TABLE>
Rental expense for all operating leases totaled $1,353,242, $1,548,202, and
$1,470,428 for the years ended March 31, 1996, 1995, and 1994, respectively.
(11) Employee Benefits-
------------------
On June 30, 1995, the Company combined its two qualified profit sharing plans
covering substantially all employees. Annual contributions are at the
discretion of the Board of Directors. Provisions for these plans totaling
$402,908, $233,245, and $638,375 were made for the years ended March 31, 1996,
1995, and 1994, respectively.
The Company has a qualified defined benefit pension plan covering
approximately 18% of all employees who remain after the sale of the Custom
division. This plan was curtailed in fiscal year 1995. The expense
associated with the curtailment is classified as restructuring expense in the
Statements of Income. Pension expense was determined using a discount
22
<PAGE>
rate of 8.5%, 8.0% and 8.0% for the years ended March 31, 1996, 1995 and 1994,
respectively. The following table shows the components of the net pension
expense for the fiscal year:
<TABLE>
<CAPTION>
1996 1995 1994
-------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned during $ $ 45,747 $ 26,624
the period -
Interest cost on projected benefit 200,675 193,686 126,589
obligation
Actual return on plan assets (246,743) (52,013) 27,779
Net amortization and deferral 90,164 (83,582) (118,532)
-------------------------------------
Net pension expense before 44,096 103,838 62,460
curtailment
Curtailment - 107,282 -
-------------------------------------
Total expense $ 44,096 $ 211,120 $ 62,460
=====================================
The following table sets forth the
funded status of the plan at March
31:
1996 1995
--------------------------
Actuarial present value of benefit obligations-
Accumulated benefit obligation (ABO) including
vested $2,504,771 $2,430,575
benefits of $2,452,533 and $2,429,942,
respectively
==========================
Projected benefit obligation for service rendered $2,504,771 $2,430,575
to date
Plan assets at fair value, primarily listed stocks 1,615,208 1,551,481
and bonds
--------------------------
Plan assets less than projected benefit obligation (889,563) (879,094)
Unrecognized net loss 302,812 146,823
Additional minimum liability (302,812) (146,823)
--------------------------
Accrued pension cost $ (889,563) $ (879,094)
==========================
The following assumptions were used
in determining the projected benefit
obligation:
1996 1995
--------------------------
Weighted average discount rate 7.75% 8.50%
Expected long-term rate of return on plan assets 9.00% 9.00%
</TABLE>
(12) Other Postretirement Benefits-
------------------------------
The Company provides certain health care and life insurance benefits for
retired employees. All of the Company's employees may become eligible for
these benefits after meeting
23
<PAGE>
minimum age and service requirements. The Company funds benefits as incurred.
The plan is contributory with retiree contribution levels adjusted annually.
Effective as of April 1, 1995, the Company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." In applying SFAS
No. 106, the Company recorded a one time pretax charge of $248,034 ($151,301
net of tax) as a cumulative effect of a change in accounting. The components
of the 1996 periodic postretirement benefit costs cost were:
<TABLE>
<CAPTION>
<S> <C>
Service cost $ 18,245
Interest cost 21,098
----------
$ 39,343
==========
The plan's funded status as of March
31, 1996, was as follows:
Accumulated postretirement benefit
obligation
Retirees $178,446
Fully eligible active plan participants 3,655
Other active participants 88,876
----------
Total 270,977
Unrecognized net loss 9,299
----------
Accrued postretirement benefit cost $261,678
==========
</TABLE>
The discount rate used was 7.75%. The 1996 medical trend rate was 9.50% and
is assumed to decline gradually to 5.50% for 2004. The entire increase in the
medical trend rate resulting in a single medical claim cost exceeding $3,600
is absorbed by the retiree. A 1% increase in this annual trend rate would
increase the accumulated postretirement obligation by $3,516 and the annual
aggregate service and interest costs by $662.
(13) Commitments and Contingencies-
------------------------------
In connection with the sale of the Custom Division, the Buyer assumed
liabilities including $3,680,000 of Industrial Development Bonds. The Company
remains contingently liable for these bonds ($3,271,998 at March 31, 1996),
should the buyer be unable to meet the required payment schedule.
The Company is involved in various claims and legal actions arising in the
normal course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's statements of operations or its financial condition.
24
<PAGE>
(14) Subsequent Event-
-----------------
On February 11, 1997, the Company' stock was acquired for approximately $50
million.
25
<PAGE>
SHADE/ALLIED, INC
CONDENSED BALANCE SHEET
DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
------
CURRENT ASSETS:
Cash $ 3
Accounts receivable, net 6,091
Inventories 7,078
Prepaid expenses 143
---------
Total current assets 13,315
PLANT AND EQUIPMENT:
Land and buildings 2,904
Machinery and equipment 11,460
---------
14,364
Less accumulated depreciation 10,388
---------
Plant and equipment, net 3,976
OTHER ASSETS:
Other assets 1,248
Goodwill 33,308
---------
Total assets $ 51,847
=========
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
CURRENT LIABILITIES:
Current portion of long-term debt $ 3,930
Accounts payable 6,817
Accrued liabilities 4,253
Accrued income taxes 942
Deferred income taxes 1,010
---------
Total current liabilities 16,952
DEFERRED INCOME TAXES 541
OTHER LIABILITIES 1,001
LONG-TERM DEBT 25,136
REDEEMABLE PREFERRED STOCK 10,198
STOCKHOLDERS' DEFICIT:
Common stock 30
Additional paid in capital 1,756
Retained deficit (3,729)
Treasury stock (38)
---------
Total stockholders' deficit (1,981)
---------
Total liabilities and stockholders' deficit $ 51,847
=========
</TABLE>
See accompanying notes to interim financial statements.
26
<PAGE>
SHADE/ALLIED, INC
CONDENSED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED DECEMBER 31,
------------------------------
1996 1995
-------- --------
<S> <C> <C>
Net sales $68,410 $89,493
Cost of goods sold 59,101 74,271
------- -------
Gross profit 9,309 15,222
Selling, general and 5,196 5,941
administrative expenses
Amortization of goodwill 973 970
Restructuring expense 394 -
------- -------
Income from operations 2,746 8,311
Interest expense 1,626 2,236
------- -------
Income before income taxes 1,120 6,075
Income tax provision 915 2,655
------- -------
Net income $ 205 $ 3,420
======= =======
</TABLE>
See accompanying notes to interim financial statements.
27
<PAGE>
SHADE/ALLIED, INC
CONDENSED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED DECEMBER 31,
------------------------------
1996 1995
-------- --------
<S> <C> <C>
Net cash provided by operating activities $ 1,096 $ 9,731
Net cash used in investing activities - capital expenses (56) (549)
Financing activities
Net repayment under revolver (153) (5,413)
Payments on long-term debt (900) (3,780)
------- -------
Net cash used in financing activities (1,053) (9,193)
======= =======
Net change in cash (13) (11)
Cash, beginning of period 16 14
------- -------
Cash, end of period $ 3 $ 3
======= =======
</TABLE>
See accompanying notes to interim financial statements.
28
<PAGE>
SHADE/ALLIED, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
1. General
The unaudited financial information reflects all adjustments, which in the
opinion of management are of a normal recurring nature, to fairly state
Shade/Allied's financial position and results from operations for the reasons
presented. The information should be read in conjunction with Shade/Allied's
audited financial statements for the year ended March 31, 1996.
2. Inventories
Inventories consist of the following:
December 31,
1996
----
Raw material $ 3,960
Finished goods 3,118
--------
$ 7,078
========
29
<PAGE>
This report contains certain forward-looking statements (as such term is defined
in the Private Securities Litigation Reform Act of 1995) relating to the Company
that are based on the beliefs of the management of the Company, as well as
assumptions and estimates made by and information currently available to the
Company's management. When used in this report, the words "anticipate,"
"believe," "estimate," "expect," "intend" and similar expressions, as they
relate to the Company or the Company's management, identify forward-looking
statements. Such statements reflect the current view of the Company with
respect to future events and are subject to certain risks, uncertainties and
assumptions relating to the operations and results of operations of the Company
as well as its customers and suppliers, including as a result of competitive
factors and pricing pressures, shifts in market demand, general economic
conditions and other factors, including those that affect wholesale and retail
office products and the business activities of the Company's customers and
suppliers. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions or estimates prove incorrect, actual results may
vary materially from those described herein as anticipated, believed, estimated,
expected or intended.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by the
undersigned hereunto duly authorized.
American Pad & Paper Company
American Pad & Paper Company of Delaware, Inc.
/s/ William W. Solomon, Jr. April 24, 1997
- --------------------------- --------------
William W. Solomon, Jr. Date
Principal Accounting Officer
30
